How to make a budget

We'll help you figure out how to put your money to work for you.

Set your goals

What are your aspirations? Thinking about what you want now and down the road helps you form the foundation for your budget.

Set your budgeting goals around what's important to you. Use this budgeting guide to see how much money you're bringing in and how much needs to go out. What's left over can be used to help you meet your aspirations.

How to make a budget

Checking in on your household's monthly budget at least once a year is a smart practice. The discipline will help you balance income and expenses while putting money toward financial goals, such as saving for college or paying off debt.

Consider the following tips to help get you started.

Popular budgeting methods

Find an approach that works best for you. Here's how to make a budget two different ways:

  • Zero-Based Budgeting: With this method, you assign every incoming dollar to a spending (or saving) category. The categories may cover current expenses or anticipated future expenses, such as car maintenance or holiday gifts.
  • The Balanced Money Formula: This method asks you to categorize your spending into three categories: fixed costs, financial goals and flexible spending. The categories should equal no more than 50%, 20%, and 30% of your monthly income, respectively.

Get started with budgeting

You may think there's a secret formula to budgeting the right way. Guess what? There's not. The equation is simple: Income - Expenses = Money for your goals.

Follow these steps to create a budget.

  • Track all expenses for one month. Once you know where your money goes, you can adjust budget categories and future spending accordingly.
  • Set financial goals. Whether you want to pay down debt, save more for retirement, or take a vacation — goals will help keep you accountable with your budget.
  • Review and adjust as needed. Because income and expenses can vary from one month to the next, you should regularly review your budget to see if your budgeted amounts are too high or low.
  • Use a budgeting tool. There are countless apps to help you manage your money. These tools may simplify budgeting, which may help you stick to it.

Your chapter 1 checklist

Next step

Saving for a goal

Simply put, goals help you attain those things you might aspire to have or do.

Video Transcript

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.

Start a Quote
Select a product to start a quote.
Agents Near You
Contact Us

Also important

Reaching your financial goals

Have you been putting off that budget for far too long? Financial Expert Tonya Rapley, State Farm agent Kameren Nelson and financial coach Eric Joynt tackle the 'B' word.

Budget and start saving money today

If you've been putting budgeting off, you've come to the right place. In Budgeting 101, we show you how to kickstart your motivation and budget like a boss.

Related articles

How to pay off student loans quickly

Learn ways to make repaying student loans more manageable.

Reasons to buy life insurance

Life insurance is often thought of as a way to protect loved ones by providing for final expenses and estate taxes but you can think beyond that.

3 State Farm® apps to download today

Put your tablet or smartphone to work with State Farm apps that make it easier to manage your insurance, help new drivers build skills and offer feedback on your drive time.